Tuesday, May 31, 2011

This one really irritates me. Get ready for "chapter 22" for GMAC (bankruptcy x 2). The Taxpayer-owned auto finance bank formerly known as "General Motors Acceptance Corp." and now known as "Ally Financial" (what a stupid name) is back doing what it knows how to do best: make risky loans that drive the company into insolvency. Only this time with a 74% backing of Taxpayer money. Here's the article: LINK I knew back in 2002 that GMAC was going to hit the wall. Back then I was aware that GMAC was one of the largest users of derivatives in the world. History will once again repeat, as GMAC/Ally will go tits-up again, only this time it will be your money, not shareholder money. Both times Wall Street made billions...

I'm guessing everyone has seen the news reports this morning which show that the U.S. economy is rapidly spiraling into a depressionary abyss. I love it when my forecasts are vindicated, as the Case-Shiller home price index reported a big drop for March and is now at an 8-year low. Here's the LINK One of the bow-tie bubblevision analyst morons proclaimed that lower prices wouldn't lead to more foreclosures. Too bad he does not read this blog, otherwise he would know that there is a direct statistical correlation between negative home equity and the occurrence of strategic default, affectionately known as "jingle mail." Not only that, but this will fuel the vicious feedback loop in which prospective buyers will likely decide to intelligently postpone buying a home, as the market is getting worse. This just isn't a foreclosure inventory problem and it's not a credit-availability problem, as FNM/FRE are doing with home-loans the same thing than GMAC is doing with auto loans and have been relaxing credit standards.

Elsewhere the consumer confidence index for May fell to 60.8 and was significantly lower than was expected by the group-think, highly paid Einsteins on Wall Street, who were looking for the index to increase from April's 66 reading to 67.5. Ouch! These economists are less accurate than weathermen and they get paid a helluva lot more...insane...

Does anyone know if the company that prints up food stamps is a public company? If so, what's the stock ticker? Why? The number of people receiving food stamps just hit a new record of 44.2 million. Talk about a growth business..per zerohedge.com: LINK That's roughly 1 in 7 Americans...

Finally, got gold? It is expected by this Einstein from HSBC that China will be settling more than half of its trade in yuan by 2015: LINK Heh heh hehhh. I expect China to be settling a much higher percentage of its trade well before 2015. I also expect that the yuan that we'll be trading with will be gold/silver-backed.

P.S. Everybody enjoying watching AIG stock melt away as much as am I?

UPDATE:Per a comment in the comment section, JPM is the largest provider of food stamp debit cards in the U.S. They have a contract with 26 States PLUS Wash, DC! Food stamp debit cards!!! I want one. This whole show is becoming so surreal that it wouldn't be possible to make this stuff up.

Monday, May 30, 2011

The Pending Home Sales index tanked over 11% from March. Although no one in the media pointed this out, March's number was revised downward so the drop in April was probably even uglier. Here's the LINK in case you want to read the retarded gibberish of Larry Yun, the National Association of Realtor's mentally debilitated chief economist about why the weakness is temporary.

The fact of the matter is that all phases of the economy that have been benefitting from the trillions in Government/Fed support, including substantially relaxed credit standards, are starting to fade quickly and now we're looking at GDP contraction on a "real" basis, or measured nominal "growth" less an adjustment for "actual" inflation, where "actual inflation" is defined as the cost of living for most Americans based on what Americans spend money on everyday, including food and energy. Let's not forget that there seems to be a determined effort to cut spending and raise taxes, which will further hammer growth if either of those two goals are accomplished (I doubt they will be).

Precious metals analysts who I think are worth paying attention to (there's only a few) are now thinking - as am I - that we could see a surprise, counter-seasonal move in gold that will take us quite a bit higher by the time the seasonal Indian buying kicks back in at the end of August. I suspect more and more Americans are beginning to understand why gold and silver are necessities and I don't expect that the Chinese demand will subside. In fact, as I was mentioning to someone yesterday, I believe the Chinese are getting closer to "pulling the plug" on the dollar and they need to buy a lot more gold to make it worth their while.

Could be an interesting week ahead, especially if tomorrow's Comex gold report shows more than 10,000 open June gold contracts still standing for delivery...

Friday, May 27, 2011

Right now I'm watching the June open interest for Comex gold. Anyone long a June gold contract and who either can't take delivery or does not have an account funded to take delivery must be out of their June gold position by the end of close today, as Tuesday is 1st notice day and Monday is a holiday. As of yesterday afternoon, there were still 3.4 million ozs. of open contract positions vs. 1.7 million ozs. of Comex gold available for delivery (registered). Yesterday saw heavy liquidation of June gold positions, with 60% of that liquidated rolled to August, the next front-month (significant delivery month). It will be interesting to see what the June gold o/i is for the end of today when the numbers are published Tuesday. Whatever that number is will be an indication of the number of contracts that want delivery, as notices can go out as early as tonight.

Typically, NY trading desks start long weekends a day early. So it's possible that we might not see much liquidation in June today. For sure the price-action is not indicative of open interest liquidation, although there could be heavy roll with no net liquidation. Anything around 2mm ozs. still open will not be good news for the Comex shorts. Stay tuned...

I'm busy watching the French Open on ESPN 2 and adding to my fund's ECU position, so I just wanted to post an excerpt from an interview on King World News with Rob McEwen, a legendary mining company builder/operator:

“If we follow the course of history, we’re going to see the value of the dollar, in terms of its purchasing power, further reduced. Our cost of living is going to go up and that’s not good for anyone. So we need to find ways to protect ourselves, and historically gold, silver have been one of those areas that have protected large parts of financial assets when you have monetary systems being debased by governments that are eager to try to ward off the creditors. The QE3 is going to happen and there will be a QE4 and probably a QE5. We’re looking at unprecedented amounts of monetary stimulation occurring not only on this side of the Atlantic, but over in Europe and it has been to stave off a collapse. There has been tremendous loss of value, but we haven’t seen a big jump in employment and we haven’t seen a large jump in capital investments and that’s what we need to see.

Here's the LINK. Buon fine settimana e divertiti per il ponte! (Have a good weekend and have fun for the long weekend)

Thursday, May 26, 2011

Here is a simple reason, succinctly summarized, why gold is going much higher:

The prognosis for the dollar is terminal, in our opinion, short of political sea change. In that sense, our view, right or wrong, is at odds with the consensus view (emphasis is mine).Hope that the political battles over the debt ceiling and the future of government spending will result in fiscal sanity and that, pending such an outcome, normal economic progress will resume, to us seems misplaced. Welfare state democracy is incompatible with sound money, in our opinion

Here's the LINK of this must-read commentary from John Hathaway on King World News. "Consensus view" is that gold/silver are in a "bubble" that is ready to collapse at any moment. I can't tell you how many conversations I've had with many many people who think gold is "too risky" right now, or that it has "run up too much," or that "their investment advisor says its best to avoid."

LOL. I love the hoi polloi and their idiot "expert" investment advisors. Why? Because as long as that consensus attitude and view - and Wall Street promoted view, I might add - persists, it tells me that very easy money in gold, silver and mining stocks is yet to be made. It's incredible really. I was just discussing with someone last night how I thought in 2002 that what is happening now would have happened by 2005. I never imagined that the public would still place this much faith in the sytem and their comatose money advisors like this. I still know people who are in the process of buying mid-high six figure homes. That's insane. Never in my wildest dreams did I ever expect that the markets would still be seriously mispricing the precious metals and mining stock sector.

Oh well, it's the power of Government thought-control per Orwell - and the willingness of the masses to have blind faith in that which they are too lazy to think about for themselves - that enables those willing to look at the Truth and to think outside-the-box to take advantage of the predicament...

Wednesday, May 25, 2011

First of all, before anyone gets all jiggy about the idea of the Goverment selling some of OUR gold to pay off Treasury debt, I would first like to see evidence other than a book-entry on the Treasury financial statement that the gold even is there to be sold. Until that happens, all else is a waste of brain cells.

Stay away from AIG stock. If what I think happened did happen, this stock is eventually going to go back to zero and the company is going to hit the wall again. Interestingly, I saw a news report a couple days ago that the insurance regulators had not even audited AIG's main insurance units prior to this stock sale. THAT is reason enough alone to stay as far away from this as possible. I wouldn't be surprised if many of you get calls from your favorite stock-pusher looking to sell you on why AIG is "cheap" here.

In a nutshell, this is what I believe went down: Based on the way it's trading I suspect that the Govt forced the underwriters to take down a lot that stock as payback for all the money Geithner transferred to the Street over the last 2 1/2 years. Big ipos like this never get hammered out of the gate unless they didn't fully placed. And that might have entailed underwriting desks placing blocks of the stock with "good" accounts so they could break syndicate with the understanding that the buyer could flip it back at cost at the break. We used to do that with really crappy junk bond deals. What this means is that the underwriters are looking at any trading losses from choking down more stock than there was demand as part of the "cost" of earning the $385 million in underwriting fees (your tax money, that is). Now the stock jockeys at the big underwriters are doing a "Boiler Room" and pressuring the stockbrokers unload this stock on the public. In an ideal underwriting, the underwriters actually run a short in the new issue and use the bidding power to make the stock perform well at least for a day. The fact that this stock is tanking tells me all I need to know about how this deal was orchestrated.

If you think I'm nuts, one of my colleagues who I ran this by remarked: "that explanation is probably as close to the truth about how this deal was executed as we'll ever get." I don't even have to go through the financials after observing AIG's operations over the past 2 1/2 years to know that it will hit the wall again.

In terms of Government transparency and accountability, take a look at this 7 minute preview to a Frontline project in the making. It looks like the Government/Defense Dept is spending billions of taxpayer money with absolutely no accountabilty or public knowledge. If this doesn't scare the bee-jeezus out of you about what his going on in our country with regard to the Government-creep toward totalitarianism, then you are fated to be one of Warren Buffet's "serfs" (recall he said a few years ago that ths was going to become a country of "serfs"): http://projects.washingtonpost.com/top-secret-america/articles/frontline-video/

This video reflects Orwell's "Big Brother" vision perfectly. It is utterly horrifying to me. This is what founding fathers like Thomas Jefferson were most worried about when they warned the citizens against letting the military complex take control of the system - looks like We're already there, dude.

Tuesday, May 24, 2011

(1) China is now on an all-out campaign to build up its military. (2) China wants the renminbi to backed with a huge percentage of gold, thereby making the renminbi the world's best and most trusted currency. To compete, I believe that somewhere head the US will have to back its current irredeemable fiat currency with gold. In order to do that, the US will have to boost the price of its huge gold hoard to a level where the dollar may be backed anywhere from 50% to 100% with gold. That could mean unilaterally raising the price of gold to maybe $5000 and ounce or more...I thought that gold, closing higher, in the face of the stronger dollar, was significant. Gold appears to be advancing against almost all fiat currencies...

Points 1 and 2 above are not new to me. I've believed all along that China wants to ultimately reinstate a gold/silver-backed currency. They will need #1 in order to accomplish that. In order to accomplish a suitable backing, the price of gold/silver will have to revalued by several multiples from where it is here. It will be interesting to see if China forces the U.S. to provide full-accounting in public of its gold holdings. Again #1 above is a requisite to pull that off.

$5,000 is a number that seems to have been "popularized" by the widely publicized Jim Rickards. I believe Rickards is either low (gold target) or wrong (view that Fed won't continue QE) on many of his views. Frankly, I believe $5,000 is too low. Although I refuse to disclose my view on the ultimate target for gold - for the reason that I don't want to face the same vehement, self-righteous indignation that I faced back in the early 2000's when I said housing would collapse - I believe that $5,000 could be low by at least a couple multiples.

Of course, by the time all the events take place that would drive to gold to where I think it can go, we may be fully embroiled in in WW3 (see RR's #1 above) or life will be unbearably miserably and democracy-free in this country...

Monday, May 23, 2011

U2's show on Saturday night at the new Mile High Stadium was epic (see below). With Canadian markets closed today, I didn't expect the action in the metals/miners to be very exciting. Silver continued on its volatile ride. The COT report on Friday showed continued liquidation by the large hedge fund category and continued reduction in the net short position of the commercial category (i.e. the manipulating bullion banks backed by the Fed). This is VERY bullish. Furthermore, if you participate in the trading action on the Comex on a daily basis, you can't but believe but that silver doesn't want to go any lower and that the "path of least resistance" will be sideways to up. The hourly trading chart is carving out a nice higher-lows "wedge" formation, which is typically bullish (although not always). It is my view that, ironically, the manipulators are seeding the silver market (and gold, in fact especially gold) for the next move higher.

From a fundamental perspective, it is clear to anyone who is active in the bullion markets that the lower price of silver has intensified the public's appetite to purchase physical silver. There are shortages of silver eagles and the premiums at all coin dealers moved up sharply over the last two weeks. Furthermore, the situation in Europe with Greece/Italy etc is creating a buying frenzy in eurogold that is driving eurogold to new record highs. Obviously in this country QE3 is being planned, and somewhat anticipated by the markets, unless the Fed for some reason decides to let the Dow/SPX and economy crash. That will be very gold bullish and likely the reason that James Turk made these comments at King World News yesterday: LINK

This is typically a slower week in the markets ahead of the 3-day Memorial Weekend. It probably will be for me posting, unless of course I come across news that irritates me lol. I thought I would make sure that everyone saw how the banks are repaying the Taxpayer's kindness for saving them and their hefty compensation packages: Banks Push Consumer Bureau to Keep U.S. Complaint Line Private This news item came out 10 days ago but I ran across it again to day and I thought people should be aware of just how two-tiered our Rule of Law system has become: There's the big banks and then there's everyone else. Here's the LINK

U2 put on a spectacular show Saturday night. I'm not sure there's any other active rock band right now that can sellout a concert stadium show. I get a bit irritated by Bono's limousine-liberal politics and his impassioned political activism on behalf of small out-of-the-way countries - he should really be working on helping to solve Ireland's potentially catastrophic financial situation. But politics aside, I think the only rock show I've seen that's more memorable than a U2 show was sitting in the second row at Madison Square Garden for the Rolling Stones in 1998. Here's the intro from Saturday:

Friday, May 20, 2011

I can't wait to see them! I saw them last in NJ at the Meadowlands in 1997 - the Pop Tour. So I'm doing an abbreviated post today. Besides, I'm spending most of my morning taking taking profits on the mining stocks I loaded up on near the close yesterday and adding to our junior mining positions at ridiculously cheap prices. Some of the ones I bought yesterday are up over 5% right now as I write this!

It's my view that silver/mining stocks are washed out to the downside. Gold never even really had much of a correction since the attack on commodities three weeks ago. Today's action convinces me that the bullion banks and the Fed will have trouble taking the metals lower.

It's no coincidence that the hit on silver occurred AFTER Europe and Asia went home for the weekend, leaving only the paper thiefs in NYC to try and hammer down the price of metals. They took a shot at silver on the heels of TWO voting FOMC members stating today that they can't take away the easy money anytime soon: LINK And don't forget that Janet "I look like Janet Reno" Yellen is the Vice Chair-idiot on the FOMC now. Recall that she gave a speech last year in which she advocated taking Fed funds negative in order to "stimulate" employment....siete capisce? QE3 is coming soon.

Here's another little gem that isn't getting much media play. The cost to buy insurance agaist U.S. Treasury default is the highest it's been since January: LINK It costs .5% to hedge a 5 yr Treasury yielding 1.8%. It costs nearly 33% of your return on investment to hedge against default. That says it all right there...I hope everyone took advantage of that little gift delivered by the bullion banks this morning and added to positions when they smacked silver after the Comex opening. I also hope everyone took advantage of that last pullback in ECU and added. ECU will soon have drill results from their deep-drilling and if the results come in anywhere near as good as I think they will, this stock will give the large short-sellers their own day of rapture.

In the meantime: Have a great weekend! Here's U2 in Mexico City last week week performing one of my faves:

Thursday, May 19, 2011

How come no one is equating the LinkedIn IPO with an investment bubble? But it occurred to me as I lift my leg on any notion that gold and silver are in a bubble: Someone show me one stock in the mining sector that has done what LinkedIn did today, in one day. In fact, I'm not sure there have been any mining stock private-to-public IPO's this year. Remember how many internet/tech IPOs there were per day back in 1999-2000? We can't even BEGIN to discuss whether or not there is "over" investment in the precious metals/mining stock sector until everyone is discussing their favorite penny mining stocks...

Not that those of us who know The Truth should be surprised by this, but the consensus forecast on several economic indicators released today were substantially below the highly compensated Wall Street "Einstein" consensus forecasts. Just what kind of fairy-tale is Wall Street/Obama pedalling these days? I guess the reason they can promote their fiction is because most of the country passively enables - or wants to believe in - this world of make-believe.

Let me jump in here with links to the news reports - I don't think it requires too much commentary other than the theme that our economy is tanking hard continues to get further support. What I don't understand is why the highly-paid geniuses on Wall Street with access to better than I continually fail in their forecasts, as do Bernanke and Obama.

"Existing home sales fall unexpectedly in April" - This one should have been a no-brainer to forecast. What makes the data even worse is that plunging home sales are occurring while interest inch lower, credit standards are loosening up, the Government continues to subsidize credit risk via FNM/FRE/the Fed AND we are in what should be a seasonally strong period. Here's theLINK

"Philly Fed sinks to 3.9 in May" - Wall Street was expecting a robust reading of 23. Clearly, for whatever excuse the experts want to attribute, the manufacturing sector is tanking. Here's the LINK

"April leading economic indicators fall .3%" - Wall St. was expecting no change from the previous month. To make the case for housing even worse, one of the positive readings for this metric was interest rate spread, which means lower rates should be stimulating housing, but they're not. Typically there is a high correlation between this index and the direction of the economy and the S&P 500. Here's the LINK

Japan Q1 GDP reading MUCH worse than expected - down 5.2% annualized when you remove the deflator (i.e. actual output net of price increases) - This was substantially worse than any of the stock and economy promoters were expecting. This is actually horrifying. To be sure, there is a large effect from the nuclear disaster, but many on Wall Street actually thought the "rebuild" from that would promote growth LOL. Here's a LINK to the details, with just straight reporting and no spin.

Government being called on to monetize Postal Service Retirement Benefits. Does anyone REALLY think that the $2 trillion debt ceiling raise will be the last? Does any REALLY believe that our Government will turn trillion-dollar deficits into a manageable budget? REALLY? Here's an instance in which the taxpayer will called-upon to pay for even MORE entitlements - the numbers in here are horriflyingly large: LINK

Regardless of what caused the plummet in Japan's economic acitivity, there will be a large "ripple" effect globally, especially one that reverberates here and in China. There may ultimately, eventually be a small "snap-back" effect, but I doubt that will be anytime soon because the large part of economic demand in the major economies has been derived from massive monetary stimulus - the stimulus that policy-makers say they will no longer continue. Of course, politicians like to keep their jobs - even Bernanke. So I believe that not only will we see a continued increase in QE and deficit spending in this country, but the problems in Europe in and Japan make it a rock-solid bet that we will see more QE in those economies as well.

The interesting question for me is, if the Japanese Central Bank has to divert funds away from supporting our Treasury auctions in order to support its own economic survival, who will start funding the inevitable $2 trillion increase in debt-spending in this country? LOL - that's strictly a rhetorical question, of course.

As for the action in the metals markets. The net long position in silver of the "large spec" (hedge fund momentum player) category is now at its lowest since February 2010. I actually thought it would take a hit into the high $20's to see that occurrence. What it tells me is that we are likely near a bottom in the silver market correction. Here's excellent commentary on the condition of the physical silver market as reflected in the market for 1 oz. sovereign-minted coins LINK There is no question that the supply of silver is getting tighter by the day, not only here but globally. The commentor also gives a great explanation for why we are not even close to a "bubble" in this sector.

In terms of the market-action in silver futures, the bleed-off in open interest in Comex silver has been stunning. The last time the silver o/i was at this low of level, the price of silver was $28.61 on Jan 31 this year. The Comex inventory is now down to just 100mm ozs after a big withdrawal out of the "eligible" category last night (to review, the "eligible" category represents investors who are "safekeeping" their silver at a Comex depository). From a trading perspective, although silver is still quite volatile hour-to-hour, it seems like the "trampoline mat" on the downside is giving a lot more resistance. In other words, every sell-attack seems to be met with more buying and the price "snaps-back" a lot more quickly than in the past two weeks. And finally, just to test things anecdotally, I stuck a roll of silver eagles for sale on craigslist. I was shocked by the number of emails I received looking to buy my roll. That tells me that more and more people are looking to buy on any price weakness, as opposed the past - when prices would plunge like they have and all the buyers would scatter.

My point is that I think the metals market may recover and move higher a lot more quickly than after previous price-smashing Comex open-interest liquidations AND the availability of physical silver at these prices is wearing thin.

Wednesday, May 18, 2011

I was chatting with a colleague who told me that his precious metals investing clients were telling him that everyone they know seems to be sitting on homes they bought 20 years ago for $200k that have $700k mortgages and are worth maybe $400k. To me that is the prototypical profile of any slightly "above median" U.S. suburb. In fact, although official statistics show that 25% of all homes with mortgages are underwater, I would bet good money that, if we were to use rigid market valuations, the number of homes underwater would be closer to 50%. The reality is that Greenspan encouraged everyone to use their homes like "ATM's" (remember that famous speech he gave to Congress?) and he removed all credit standards enforced on banks and Wall Street. Greenspan essentially became the lending-equivalent of a heroin dealer to the majority of the middle class in this country. I define "middle class" to be anyone who is not wealthy enough to buy a Congressman. I know there are plenty of formerly multi-million dollar homes in the Denver area that are trading for $1 million or less. Those folks are not wealthy enough to buy one of the seven House Reps or two Senators here...

Economic Woes Mount: The latest economic sentiment survey from Gallup shows that 74% of Americans think the economy is the biggest problem facing our country. That number is at its highest in two years. Here's the link, which I sourced from zerohedge.com: No Recovery Here This statistic supports my post yesterday and further supports my view that the real economy is in far worse shape than is reflected by the phony Government/Wall Street-generated economic statitics release almost daily.

"World on course for next crisis, warns Gordon Brown" - This article from England's Telegraph further supports my view that the action in the global stock, credit and commodity markets is an omen of a possible financial/economic crisis that will be much bigger than what we experienced in 2008. I thought it might be helpful to hear that view from a global elitist and not just a "chippie" (British term for blue collar plebian) like me. Here's the LINK Keep in mind that recently Carl Icahn, one of the most successful and astute investors in this country, announced that he was liquidating his hedge funds and withdrawing from the markets in order to take shelter from a massive brewing crisis...

And finally - Regarding what I see as persistent and growing Government "creep" into the control of our lives, it was reported today that a Bill was being introduced in the Senate that would restrict the ability of Americans to tap into their 401k's, even if they need the money to live. Here's the LINK This is just more evidence that the Government is headed down the slippery-slope of full confiscation. But then again, we know that most State pension funds have already been tapped into and are hopelessly underfunded; now the Treasury is tapping into Federal pension funds, setting a dangerous trend that will become even worse - and that money will never be repaid. What do you think is going to happen when public workers start complaining about their pensions being used to fund our Government?

Tuesday, May 17, 2011

I think our system is set up quite eerily a lot like it was in the late spring of 2008. Back then several large financial companies were getting ready to hit the wall and, quite frankly, our financial system experienced a "de facto" collapse. It looks like now we have entire countries set up for a "de facto" collapse, including the United States, several EU member-States and Japan.

Take a peek at the economic news today: Housing starts plunged again and keep hitting record lows: LINK. Can't really blame this one on the Japan nuclear crisis the way many U.S. manufacturing and consumer-oriented companies are and will do. Despite all the "hope" out there, the housing market continues to crumble under the excessive weight of way too much inventory, including the "ubiquitous" bank-owned, soon-to-be-owned and hope-it's-never-owned inventory. In most States delinquent mortgagees are going more than a year without making any payments - and in NY/NJ they are going more than 3 years - as banks close their eyes and do what they can from taking even more inventory onto their sagging balance sheets. Here's the comment from Reuters: "Residential construction is being crowded out by an oversupply of used homes on the market, in particular, foreclosed properties, which sell well below their value."

What's amusing about that is "their value" is the price that someone is willing to sell and someone is willing to buy. That's the value. Period. Homebuilders are either offering their product too high or they can't sell them for enough money to cover their costs. That's the classic definition of "too much supply, not enough demand equalling prices too high." At the margin, the "value" of a home is being set by the "distressed" sellers and THAT is the value of your home right now. That's plain old fashioned economics. Prices being asked by homebuilders and non-distressed existing homesellers will eventually have to converge with the pricing level of the most competitively offered homes, which are the foreclosure/short-sales, as the inventory of that seller-sector continues to balloon. Prices are going A LOT lower all across the country and this aspect of GDP will get hammered.

The manufacturing component of GDP is tanking, as industrial production declined and came in a lot lower than expected. Japan was the excuse but that's b.s. Consumers are dying on a vine. The positive component of IP was utility and mining output. The former driven by prices and the latter driven by a shift to the consumption of necessities, coal and metallic commodities plus gold and silver. Here's the LINK.

As I suggested above, the consumer is fading fast. But don't take it from me, take it from one of the major consumer product companies, Hewlett Packard, which announced a substantial cut in its revenue forecast, driven by a serious decline in personal pc-buying: LINK. Of course, Japan was the culprit here, but we know that's not true.

And here's a development that's even worse for those who believe that the "new paradigm" for our country is an economy driven by services and leisure: McDonalds is in the process of displacing labor in Europe with computers: LINK Fear not, that business model (convenience/cost-cutting/efficiency) will soon be introduced in this country, displacing much of the service-sector workforce. Alan Greenspan's "it's a new economy" vision will be one in which there will be plenty of labor in this country to provide housekeeping and yardkeeping services at a low cost to the country's very wealthiest businessmen and banking families.

What all this means is that unless the Fed shifts into a QE3 "paradigm," the new paradigm will be a stock market crash and bond market crash - a complete systemic collapse that will start with the slide that we're on now and then a big sudden drop, similar to what we saw in the autumn of 2008. The Fed has been propping up the stock and bond markets with QE1 and 2 and if QE3 does not happen, the support falls away. THIS is the scenario in which people are going to wish they had ignored the "bubble" nonsense about gold and silver eminating from CNBC, Bloomberg and everyone's favorite financial advisor. This is the paradigm shift that causes Ross Perot's euphemistic "sucking sound" out of paper currencies and into physical gold and silver. If you notice, the Chinese, Indians and other major buyers of the precious metals have actually intensified their accumulation in this latest price slide. And if the collapse of our stock market momentarily takes the metals even lower, I expect that those countries will be buying even more. And when those in this country with any paper money left finally rush to buy into this "bubble," we will see prices really go parabolic.

It's coming. Don't ask me when because I no longer stick time-frames on my forecasts. But when the time comes don't blame your big-firm, Wall Journal toting, pretty presentation-carrying golfing buddy finanacial advisor when your investment accounts are reduced to rubble and you are left standing without any means to buy gold and silver, because those of you who do know The Truth know that most financial advisors are idiots. You only have yourself to blame...In the meantime, get ready for QE3 because it will happen - it just might get a little rocky in the markets first...

Monday, May 16, 2011

Last week former FOMC Vice Chairman Alan Blinder gave a speech in which he said that more monetary stimulus would be needed in order to improve the employment situation in this country. Blinder happens to be a senior economics professor at Princeton, where what's-his-name, the current FOMC chief was departmant chairman. Some analysts from Wall Street are also now starting to entertain the idea that we need more money printing in order to fund Government spending. We know that the Obama people are begging for a $2 trillion increase in the debt limit, which will supposedly last until November 2012. Anyone believe that? The bigger question in my mind is, even with higher interest rates, who is going to fund all of that Government new issuance?

We found out today that China reduced its holdings in U.S. Treasuries for the fifth month in a row. And we know that since QE2 started, the Fed has actually been monetizing close to 100% of the Treasury auctions. So if China is reducing its holdings, thereby requiring even more funds needed to buy both China's and Geithner's bonds, if the Fed stops printing who will step in with the necessary funds?

For more proof that the economy is losing any steam it had from QE1 and 2, just take a quick look at today's economic reports. The NY State manufacturing index drop sharply and came in a lot lower than the mean consesus forecast LINK. The homebuilder sentiment index showed no improvement in May LINK and from what I've been reading, housing market conditions across the country are headed south again:

A decline for the U.S. property market is accelerating. It could fall another 20% over the next 12 months LINK

Here's another commentary that sees the likelihood of more QE3: LINK In fact, I would argue that part of the agenda with this latest attack on gold and silver is an effort by the Fed to get the price of gold and silver to much lower levels before apologetically rollling out QE3 in some form. If the metals are hitting new records everyday, it makes it harder to intellectually justify more QE. But if gold and silver are retreating in price, the Fed can patronize us with its "inflation is not a problem and is transitory" rhetoric. If you don't think gold and silver are being manipulated, then explain to me why all of a sudden a lot futures sellers show up after the London PM fix, when the physical market closes and then again after 1:30 p.m. NY time, after the Comex closes. If you were a futures trader and wanted to unload your long positions, wouldn't you try to do it when the market is at its most liquid and you'll have much better odds of getting paid a higher price than if you dump your paper in the afternoon when no one is around, which is essentially what has been occurring for two weeks now?

As every one now knows, the Treasury is going over its debt limit today and will be tapping into Federal pension plans in order to fund operations. You can see where this is headed: eventually the Federal pension plans will be used to fund Government operations, like State pension funds are being used now in most States. At some point, in the spirit of being fair, the Government will impose its will on the private pension/IRA system and convert the entire retirment system into one large Treasury funded operation managed by Wall Street. In exchange, everyone with retirement funds, public and private, will receive a "guaranteed" annuity payment when they retire. I have been warning anyone willing to listen that this is where this country is eventually headed (much the same way I warned about housing back in 2002). Would you rather pay a 10% penalty and take what you can out of your retirement plans and control your own financial destiny or take your chances and face increasing odds that an increasingly all-powerful Government will eventually take what's yours, like it is doing in many other facets of our lives?

I'm sure everyone has figure out that the Blogger software has been down for most of today and yesterday. Hopefully they'll get my post from yesterday restored.

Have a great weekend everyone. And if you think that silver was in a bubble that's popped or that this metals bull market is over, here's an oldie but goodie for you (Pick it, Pack it, Fire it up, come along, And take a hit from the bong):

Thursday, May 12, 2011

Legislation is being introduced on a bi-partisan basis that purports to replace Fannie Mae and Freddie Mac with five private firms:

"Two lawmakers, a California Republican and a Michigan Democrat, are set to unveil legislation Thursday to replace mortgage giants Fannie Mae and Freddie Mac with at least five private companies that would issue mortgage-backed securities with explicit federal guarantees" LINK

Someone please explain to me how THIS changes anything? A Government guarantee only enables extreme moral hazard. And moral hazard is moral hazard whether it's a giant Government beast being completely plundered and riddled with fraud under the stewardship of political animals like Franklin Raines or administered by total private sector thieves like Angelo Mozilo or Charles Keating. The only difference is that one - Raines - is a product of the political system whereas crooks like Mozilo and Keating buy their own politicians.

Both set-ups are recipes for disaster and massive transfer of middle class taxpayer wealth to those who benefit from the explicit federal gurantees.

Fannie Mae just recently posted another massive loss and has requested another $8.5 Billion in aid from Obama - this is at least the fourth time FNM will have been given your tax money, the total is now in the 100's of billions, and it's 3x larger than the request made just a few short months ago LINK There's surely some correlation between between the FNM/FRE bailout requests and the Treasury's repeated requests to lift the debt ceiling.

Here' my explicit guarantee: if FNM/FRE are transferred into 5 private companies, we will see 5 times as many bailout requests every quarter and we will get to subsidize the salaries and bonuses of the people running those companies just like we do for the people running Wall Street banks. There will be no difference. Fannie and Freddie should be completely shut down, let the banks (shareholders and upper management) who dumped the crappy loans onto the Government balance sheet take the losses and the Government should get the hell out of the business of making loans to homebuyers.

Update - here's what Government guarantees/moral hazard have created: Delinquent homeowners in NY/NJ go three years living with their defaulted mortgage without making any payments. Here's the LINK

Wednesday, May 11, 2011

"Ireland" being the systematic confiscation of your retirement funds by the Government. I'm sure as most of you know by now, the Irish Government has announced that it will now tax private retirement funds in order to fund "job creation." That means taking money privately earned and saved by citizens and using that money to pay public employees to do no-value-added, useless labor. You know, like digging tunnels underneath roads so that turtles can get from one side to the other without risking their lives.

I have said for a long time that the system here will be held together until "they" take every last crumb of wealth away from the middle class. "They" being the people who control the system - i.e. big banks in conjunction with big government. The multi-trillion dollar retirement asset pool will be just too tempting for our politicians NOT to tap into and I'm sure Wall Street already has made noises about how to go about doing it so that Wall Street can keep making money off of it. As the explained in the commentary I've linked below, the Government has already plundered the Social Security trust, taking the money that was in there and writing IOU's - exchanging the funds and putting Treasury bonds in the Trust. So why does anyone possibly want to believe that the Governent will leave private retirement funds alone? That's either naivete or denial.

With regard to this whole matter, here is a quote from the blog mentioned above that nicely sums up the predicament you all are in:

Chances of this money being repaid to Social Security in full? Slim. The trend is more debt, not paying off existing debt. In fact, I’m convinced that politicians have their eyes firmly fixed on the trillions of dollars in private, individual retirement accounts (IRAs) in the United States to fund new spending.

Here is the LINK - it's an excellent read. I say "you all" because starting in 2006, I have moved all of my IRA money into physical gold and silver and if I don't want to pay any taxes on the use of it I can move to Utah, which recently passed a law which exempts gold and silver used as currency from taxation.

If you are still skeptical that this will happen in this country, I would like to point out that there have already been hearings in Congress in which academic and banking professionals presented their ideas on why it makes sense to require that all retirement fund assets should be moved into a trust that is funded by Treasuries and uses the interest on the trust to annuitize everyone's retirement payout. If you play around with google you can probably find the actual press releases which describe those hearings (I lost my links when my laptop blew up over the summer).

The best part about the situation in Ireland is that Government employees are exempt from the taxes being levied on retirement funds. I would expect the same thing to happen here given the huge fight being waged right now across the country to preserve 100% of public employee pay and benefits. It's okay to plunder the private the wealth but the Government and its drones are sacred!

One last point. I personally do not believe that you can avoid overt or de facto compensation of your retirement funds by moving them offshore, as the blogger above recommends. I think anything that has an electronic trail will be fair game, open season. The ONLY way you can preserve your hard-earned wealth is to move as much of it as you can "off the grid." And the only way I know of to do that is to convert your paper largesse into gold and silver.

Ted Bulter's undying faith in the CFTC and Gary Gensler never ceases to amaze me. His analytic work on the silver market and the COT reports is brilliant. And yet, his ability to discern and detect the truth about what is going in our system with regard to regulation of the securities markets borders on complete ignorance. I give him the benefit of doubt on that and prefer to believe that he is hopelessly full of hope and tragically naive. On the the other hand, he may suffer from what is known as Stockholm Syndrome. Here is a great description of the psychological phenomenon from wikipedia:

In psychology, Stockholm syndrome is a term used to describe a paradoxical psychological phenomenon wherein hostages express empathy and have positive feelings towards their captors. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors as an act of kindness.[1][2] The FBI’s Hostage Barricade Database System shows that roughly 27% of victims show evidence of Stockholm syndrome LINK

Now read this excerpt from Butler's latest public posting:

As you know, I have put Gensler on a pedestal, repeatedly referring to him as the greatest chairman in CFTC history. Considering my past experiences with the agency, I still marvel at my transformation. I think he has done more than anyone ever to reform commodity regulation, including working diligently, although very quietly, to end the silver manipulation LINK

Now, given everything about the extreme illegal manipulation of the silver market that goes on pretty much daily, and given that the CFTC has continually, and with full knowledge of all the data supporting the manipulation claims, looked the other way, I would say that Ted Butler has become a metaphorical prisoner of his own desire for reform and thus suffers from a form of Stockholm Syndrome.

I couldn't care less about this other than the fact that Butler's work is read by many globally, and now many pay to read his proprietary wisdom. I sincerely hope that those multitudes have the understanding and awareness of the facts to overlook this aspect of Butler's otherwise brilliant body of work.

~ ~ ~ ~ ~

In his latest Commentary on the jobs report, unemployment, money supply, inflation, etc. John Williams lays the truth in some insightful comments that I wanted to share. This guy's newsletter does a brilliant pulling away the "curtain" that the Government/Fed uses to hide the facts:

With regard to the latest monthly employment report: Given the increasing level of concurrent seasonal-factor adjustment distortions, and the sharp upside adjustment to April's birth-death model bias-factor, the reported payroll gain was not meaningful. Following the plunge in payrolls in the early part of the economic downturn, a protracted period of bottom-bouncing commenced. Year-to-year change in the reported bottom-bouncing now has flattened out at about one-percent, and nonfarm payrolls still are below where they were ten years ago

With regard to QE3, after pointing out that the Fed has bought more than the entire amount of new Treasuries issued during the last 5 months: Ostensibly, the Fed has done this in an effort to stimulate the economy and to debase the U.S. dollar (create inflation). While the Fed has little chance of turning the economy to sustainable economic growth, it has been successful in triggering an upturn in consumer inflation. That has been seen in recent months and likely will be reconfirmed in the week ahead.

With regard to the dollar/wealth preservation: Despite whatever volatility there may be, the U.S. dollar remains on track for an eventual complete collapse in a hyperinflation, and the roots of that hyperinflation remain imbedded in the system. The primary hedge against losing U.S. dollar purchasing power remains physical gold (and silver), with some funds outside the U.S. dollar

The way John Williams lays out the golden truth and backs it up with raw statistical analysis is unique. His work can be accessed at http://www.shadowstats.com/

Monday, May 9, 2011

ECU CEO Michel Roy released a letter to shareholders with a complete update on operations today. Before I get on my soap-box and highlight the salient operational points, I would like to first re-print this quote from the letter with regard to the inexorable, illegal manipulation and price-capping of this stock that has occurred for several years now:

ECU's stock also appears to have received excessive pressure from trading patterns which appear designed to suppress the stock price. Management considers this to be a serious concern and is in discussions with legal counsel regarding the nature of this activity and potential recourse.

One of the largest shareholders has been meticulously and laboriously keeping track and recording the market-making activity in this stock for about 4 years, at least. Eveyone of us with decades of trading experience have evaluated this data and it is unequivocally illegal manipulation, likely in conjunction with a rogue blogger who operates out of Peru. I even believe Citadel Capital, the Chicago-based hedge fund may be the lead perpetrator. Having said this, the shareholder referenced above has filed several complaints with the regulatory officials in Canada - I have seen some of these complaints - and of course the complaints have been arrogantly and summarily dismissed. It is beyond absurd but not unexpected given the corrupt nature of the regulatory bodies governing both Wall Street and Bay Street in Canada.

For whatever reason, the market seems to overlook many of ECU's key accomplishments to date, the most significant of which is that they are systematically exploring and proving what turn may turn out to be one of the largest silver deposits in the world. One of the big criticisms of ECU has been that the metallurgy of the deposit is not economical. ECU has spent a lot of time and energy disproving this by building a milling operation which has been processing stockpiled ore and converting it into gold/silver/etc concentrate which is used to help substantially fund ECU's continued drilling activities. You tell me if you think this sounds like its deposit is not feasible:

ECU has increased revenue over the past five consecutive quarters, enhanced by the successful negotiation of the sale of a 13,000 tonne stockpile of processed material containing gold pyrite. Revenue in Q4 '10 was over $6.4 million, almost 200% higher than the period five quarters earlier. Altogether in 2010, metal sales increased year over year by 250% for gold, 144% for silver, 568% for lead, and 375% for zinc. Although the sale and delivery of the gold pyrite stockpile has been completed, management expects revenue from production to improve when the company mines in recently-developed stopes containing significantly higher resource grades...An accelerated development program is underway to advance additional veins, and mining levels, to a stage where mineralized material can be extracted from more mining stopes, thereby increasing production.

The entity that purchased the gold pyrite was one of the largest multi-national gold and silver miners in the world. In my view, one of the most significant aspects of this milling operation is that it should expedite the pre-feasibililty/feasibility process once ECU is ready for that stage of mine development.

Currently ECU is in the middle of drilling a Mass Sulphide Zone (MSZ). One of the most compelling features of what ECU has discovered and proved so far is that they have not found the ultimate "source" of the veins it has been uncovering. While ECU's last resource report contained a statement from the engineering and testing firm that prepared it that essentially said that the depost may contain close 1 billion ounces, it is thought by many of us that discovering and defining the MSZ could add another 50% to ECU's resource.

I think the biggest impediment to ECU's stock achieving a more realistic and comparable valuation, besides the smear campaign being waged from seedy corners of the market and illegal trading activities which are allowed to fester unfettered by the regulators, is the fact that ECU's share base has 308 million shares outstanding. Most junior stock investors, for whatever illogical reason, would prefer to invest in companies with less that 100 million shares. Of course, relative value is about understanding and defining relative valuation.

In that regard, let's compare ECU to Great Panther (GPL), one of the silver market darlings. We own GPL as a trading play, by the way. GPL sports a $450 million market cap and reports having 12.8 million "measured and indicated" ounces of silver (including silver equivalent) and a total of 21 million ounces, including inferred. $21/total ounces per share of valuation. Hmmmm....let's look at ECU (and I would like to say that ECU makes it significantly easier to find this information). ECU has a market cap of $237 million on top of a resource of 40 million "measured and indicated" and 430 million including inferred. 55 cents/oz per share. If you're like me, you're scratching your head on that one. Now, granted there's a story behind GPL and they are producing silver and that production is on target for some nice increases. But the disparity in valuation is absurd. And in my valuation assessment of ECU, I'm not giving any credit for "potential" resource as outlined by Micon.

In terms of trading, I took profits for myself and some profits for my fund when the stock traded over $1.10 a few months ago. I have a fiduciary responsibility to my investors (which includes me) and we had been riding some positions we put on when the stock was below .60 cents last year. But we always have a large core position in the fund. However, in this latest sell-off in ECU, some of which is obviously sector-related - but MOST of which has been due to excess shorting/naked shorting and end of day trading games each day - I have reloaded my personal position (I have been in this stock since July 2005, so I know it well) and have added substantially to the position in my fund. This is one of the cheapest silver stocks that I'm aware of by any metric you want to use. ECU should soon start releasing the first drilling results from the deep-drilling of the MSZ and will continue to do so over the summer.

Please read all of Michel's letter if you are interested in this situation and please, please, please do your own due diligence, which would include contacting the Company with any questions or informational requests. I do not often pound the table on stock plays, as it only leads to complaints from disappointed people who buy the same stocks I buy. However I am adamant in my view that ECU represents one of the best possible risk/return, fundamental/value/trading plays right now in the mining stock sector.

Friday, May 6, 2011

One reason that Wall Street bonuses are so large is that these firms commit fraud and basically lie, cheat and steal to make money while the Government voted into office to enforce the laws looks the other way:

when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed (Atlas Shrugged).

So JP Morgan made billions underwriting and packaging asset-back/mortgage-back garbage into securities and then dumping them into the laps of the people who manage YOUR retirement money and now I see that they are in "advanced" negotiations to settle this extreme fraud. Here's the Bloomberg report: LINK

If precedence sets the standard, expect that JP Morgan's penalty will be under $100 million. It's the cost of doing business in America today when, to paraphrase Francisco D'Anconia above "the people who are in charge of enforcing the laws are the people who are breaking the laws." If you think I'm fantasizing, let's take a look at Obama the good Democrat and his oval office: His chief-of-staff is an ex-JP Morgan official. Several of his closest "advisors" are ex-Goldman Sachs employees. His Secretary of Treasury is the lap-dog of former Goldman CEO and thief extraordinaire, Robert Rubin. Rubin's mentally diminutive "Mini-Me," if you will.

I bring this up because now the world is asking me to see that JP Morgan is breaking every written securities law, getting caught, paying fines that are a fraction of the profits disgorged from YOUR pension funds and the world expects me to believe that the ONLY area of finance where JP Morgan is NOT breaking the laws is in its silver futures and OTC derivatives business. LOL. Okay - really? What is beyond staggering is that the U.S. Government refuses to investigate the situation despite volumns of evidence, written, spoken, recorded and emailed pointing toward extreme criminal activity in JPM's silver and gold trading business (primarily silver with JPM and HSBC; several firms in the gold pit).

What's even more absurd is that respected market analysts like Ted Butler expect people like me to place faith in the idea that the CFTC and the Obama Administration will do something about this. That's more laughable than a Bill Mahr comedy act (I saw him a few weeks ago in Boulder and he was hilarious). In fact, the worse the obvious manipulation and criminal activity gets, the more the people in charge of enforcing the laws look the other way. In fact, for those who don't know, the Fed is fighting a Freedom Of Information Act inquiry by GATA in which GATA just wants to see the gold trading activity that has been conducted at the Fed. For some reason the Fed is contesting the right of the public to see this data. It's winding its way thru the court system, I believe that it's at the Appellate level after the Fed was denied at the State level. Someone explain to me why the public should not be able to see what the Fed is doing with the gold that is owned by the citizens of this country? What is the Fed afraid of disclosing? I have no faith that the Fed has acted legally in its gold trading activities and more and more people are losing that faith - that's why gold and silver are in a 10-year bull market that will last a lot longer...It's actually a sad and tragic implication of where this country is headed.

Several people have inquired as to my view on when this latest manipulated waterfall in silver (and gold) will be over. I don't know how low it will go and I don't know when it will go back up but i know between now and a year from now it will be significantly higher (despite the criminal activity keeping the price capped). I also know that eventually it will become very difficult to source silver eagles - the retail silver investment of choice - regardless of where the Comex/paper price of silver is. In fact, a very close friend of mine was asking me for my outlook on silver this morning. He had wavered on buying a mint box of eagles about a month ago when silver was at $32. He called Tulving the next day with silver at $34 and Tulving was out of them. Yesterday Tulving had a lot of boxes of silver maple leafs and some boxes of older silver eagles. Those are gone today and, in a conversation with Hannes, he said he does not know when he will be getting more in. I don't remember the last time a big coin dealer couldn't at least give me an estimated date of shipment.

With that physical market color in mind, I will say that it is possible that the extreme demand vs. supply in the silver/gold physical market could well reduce the severity/duration of this latest manipulative, illegal attack by Wall Street on the metals. Reports from India/Asia suggest that all levels of buyers over there are buying up physical gold/silver with both hands and feet. The market premium in Viet Nam, a key barometer of the market in my opinion, had been quite negative for the past 3 weeks or so. Last night it flipped to +$15. A very bullish indication in my view. And judging from all the reports this morning about coin dealers everywhere in Canada and the U.S. being wiped out of supply this week, it seems more and more people are catching on to the illegal manipulation game being waged on Wall Street and in DC.

And the best indicator for me is when I opened the Denver Post today and saw a full-page ad in the front section and smaller ads in other sections from some outfits who are begging you to sell them all of your gold/silver. Those are expensive ads and you have wonder how anyone can believe that gold/silver are in a "bubble" when the professionals are spending a lot of ad money convincing the public to keep selling...When those same pros start spending money to convince you to "buy" their product at the "best" prices will be when we can have a serious debate on bubble/no-bubble.

Thursday, May 5, 2011

Someone commented yesterday in my comment section that the suddenly revered Ben Davies stated that a lot of scrap gold and silver must have hit the market. I responded to that by saying that if that were the case, I would have come across reports of that happening in everything I read, most notably in that regard being the invaluable "JB" reporting, which can be found in the Midas report at http://www.lemetropolecafe.com/ every night. I suggested that Davies' assumption was incorrect. Today I saw this report from Reuters (source: the JB report):

India gold, silver traders scramble for supplies: Gold and silver traders in India, the world's biggest buyer of bullion, scrambled for supplies as they braced for strong sales for a local festival, pushing premiums higher, bank officials and suppliers said.

Here's the LINK If a lot of scrap were hitting the market, not only would I have come across it my research, but Indians would not be "scrambling" for physical supplies. Please make no mistake about it. This price-action in silver is predominantly an attempt by the major bullion banks, backed by the Fed, to create a shock and awe panic in the precious metals. This action serves a lot of purposes, not the least of which it will save JP Morgan $100's of millions in losses on its short position (blood money for a Wall Streeter) IF they can cover enough short positions. I would suggest that people who want to trade this market should form their own convictions based on knowledge and experience and not rely any supposed guru as a definitive source of information. And do not listen at all to anything you hear on CNBC, Bloomberg or Fox News.

Kudos to a heads-up from a reader of this blog who mentioned this in the comment section and shame on me for assuming the CME is anything but completely sleazy and corrupt: Yesterday's Advisory Notice noticed contained yet a 5th margin hike, effective NEXT Monday. That will raise the margins on silver to $21,600. This is truly laughable now.

So it's the FIFTH margin increase in TWO weeks. The good news is that the market is pricing that one in already. So unless they do ANOTHER one, the running of the stops may be over and we should just get the "after-burner" effects of all the morons who watch Fox/CNBC/Bloomberg piling onto the short side because some idiot says it's time to sell.

The 200 day moving average for silver is 28.32. I don't know if we'll go that low but in the past ugly attacks like this end up being 200 dma corrections. Perhaps the physical market will prevent that this time, I don't know. Every mo-mo, fast-money hedge fund trader will be assuming a 200 dma correction so perhaps that's already priced in. We'll know when we know, but these so-called dip-shit experts DO NOT KNOW.

Here's a modest proposal to the Comex: How about letting the MARKET determine where the price of silver should be? To claim the U.S. has free markets is just an outright lie - like a lot of other things being propagated by our Government and by Wall Street and by the media.

Wednesday, May 4, 2011

This is truly unbelievable and, I believe, unprecedented over the last 10 years. The CME has jacked the margins on the contract again from $16,200 to $18,900 - another 17%. Here's the LINK This is a full 61% since last Monday. This can only be seen as a sign of true desperation by the bullion banks - in their war on precious metals - who control the Comex and who happen to be short several multiples the amount of silver available at the Comex to deliver into their shorts if they get called for delivery over the next 12 months.

It will be interesting to see how long it will take for the artificial price discovery system of the Comex to substantially disconnect from more valid price discovery mechanism of the global physical silver market. Right now it takes about $4-5 over spot to buy a 500 oz. box of 1 oz. Silver Eagles - if you can find them. Tulving has been out of them for several days now, which tells me the Mint hasn't indicated when they will resume the next shipment. If the demand for silver in this country via the Mint can not be met at these price levels, doesn't it suggest that the "real" price of silver should be higher? At least higher to the point at which buyers can freely source what they want from sellers at a price somewhat consistent with the spot price as set by the Comex and LBMA...

It also suggests that the vaults holding silver for the SLV trust which are controlled by JP Morgan, by far the largest of the silver shorts on the Comex, are more than likely harboring more dust than they are deliverable physical silver (I contend that it is mostly leased out). Don't hold your breath that it's not, Ted...

That's just a complete joke. What happened to expense-cutting and prudent fiscal management? This will take the "on-balance-sheet" debt load to well over $16 Trillion. Who the hell is going to buy that paper, given that Asia is now cutting back on dollars? Anyone still want believe that the Fed is done printing? Here's the link: Geithner Is A Complete Joke What happens after that debt-ceiling is hit? Anyone who thinks that this is the last debt limit increase is a moron.

as Mexico buys 100 tonnes of gold, China/Korea/Japan will study using local currencies for trade settlement and India will settle it's oil purchases from Iran in rupees.

The Financial Times reported the Mexico purchase: "The purchase is one of the largest by a central bank in recent history. The gold, worth $4.6bn at current prices, is equivalent to about 3.5 per cent of annual mined output." Here's the link, you may need to register for free to see the whole article: LINK Do not anticipate that U.S. media/CNBC will be reporting that one. Here is the link for the China/Korea/Japan article: LINK (you may need to copy the headline and paste it into a google search window and then click on the top link that comes up in order to see the article for free). And here is the article for the India/Iran news: LINK Iran is India's second largest oil supplier.

All three events are more evidence that the world is moving away from the U.S. dollar standard. Mexico is one of several large Central Banks buying significant amounts of gold with their dollar reserves and, I believe, is the first western CB to do so. This is very bad news for anyone out there who does not understand the risks of holding their wealth in U.S. dollars. One day many millionaires in this country will wake up to find that their millions sitting in banks and brokerages will be of no value to anyone except as fuel for heat...

Tuesday, May 3, 2011

with John Williams. I was too busy catching up on research and trading this glorious volatility in the metals and mining stocks today to put together a cogent post. I made some nice trading profits in AGQ for the fund, added to the ECU position and put on some at-the-money puts on ZSL (think about that one for a second) for myself. One thing I did notice was that the volumn in both SLV and ZSL was extraordinary, potentially capitulative. In particular, the volumn in ZSL was double its 10-day average and 10x its 90-day average. Sounds to me like excessive short term bearishness...we shall see, but I did put my money where my mouth is with the ZSL puts...

Onto the matter at hand. Please read this interview carefully with John Williams. A lot of it is a rehash of concepts most of you already understand, but I really like the way he discusses the intrinsic value of the dollar vs. other currencies. He also does a particularly articulate job of translating that dynamic into how it is leading to hyperinflation in this country, perhaps sooner than he has been forecasting:

[Large holders of dollars] will sell their dollar-denominated assets. They will convert dollars to other currencies. They will buy gold. Generally, they will dump whatever they hold in dollars and sell the dollar-denominated assets they don't want. There's a market for them; it's just a matter of pricing. As the pressure mounts to get out of the USD, the pricing of dollar-denominated assets will fall, which in turn would intensify that selling. The dollar selling will intensify domestic U.S. inflation, which is one factor that picks up and feeds off itself and will help to trigger the hyperinflation.

Here's the LINK Enjoy and keep your chin up, this metals manipulation to the downside will end soon and will be seen, looking back, as being instrumental in setting up the next leg higher.

Monday, May 2, 2011

To coin a famous line from the classic movie "Apocalypse Now:" "I love smell from Comex silver margin hikes in morning - it smells like, DESPERATION!"...The CME has announced the THIRD margin increase in silver futures since last Monday. This is truly unbelievable and it explains the way silver was smashed for $1.90 in 20 minutes around 3:20 p.m. NY time, the least liquid part of electronic trading during the week. Why would someone all of a sudden decide that they need to unload enough silver futures to drive the price down this much two hours AFTER the close of Comex trading, when they had all morning to sell those contracts at higher prices during Comex pit hours? LOL. Here's the margin increase LINK

I hope precious metals newbies have not been emotionally derailed by last night's obvious ambush of silver by the corrupt Wall Street bullion bank cartel. It's funny because just yesterday I was chatting with my significant other, who happens to be from Las Vegas, about organized crime. She mentioned that Vegas is full of organized crime gangs, not just the casino mafia. I replied that any area that generates tons of cash flow is mired with organized crime and extreme corruption: Vegas, DC and Wall Street most prominently (obviously there are others but those are the biggest). Little did I know that several hours later the action in electronic silver trading would ironically highlight my point about Wall Street!

Make no mistake about it, what occurred last night right at the open of electronic futures trading in gold and silver was nothing more than a very aggressive attempt by the big Wall Street banks who are irrationally short paper silver to shake out weak hands in order to reduce the fraudulent short positions in paper silver. Anyone who thinks last night's action - as reported in the mainstream media - was connected to a feared slowdown in China or the Bin Laden thing or the Bolivian mining news is either hopelessly naive or pathetically ignorant of the facts.

So let's look at some facts. First, no other commodities were hammered. If China slowdown fears were the culprit, shouldn't all of the base metals used in industrial production have been hit hard along with silver? Seriously. Even more telling was the fact that the dollar barely moved in either direction last night - and it's below 73 right now. The media loves to explain movements in gold/silver with inverse movements in the dollar. How come the dollar was not doing a moonshot in response to the gold/silver cliff-dive?

Second, the CME has been raising silver margins regularly now. We are not seeing this in other commodity contracts. In fact, the margin on Comex silver was raised over the weekend from a little over $12k to a little over $14k. That's over 30%. The margins on gold were not raised. The CME always seems to raise silver margins when silver is moving sharply higher and when all of the evidence points to physical silver shortages. That latter point was apparent to me when I saw the very low number of delivery notices handed out. Typically a large percentage of the open contracts are given notice and delivered within the first few days of a delivery period. Not this time. What this tells me is that banks with large counterparty delivery positions (i.e the ones with big short positions, like JPM and HSBC) are going to make an aggressive attempt to induce weaker hands to puke their positions before JPM and HSBC are actually required by contract law to make delivery. Let's see how this plays out over the next 3 weeks. Last notice day is May 27th and you can monitor delivery activity on the CME website.

Third, some big off-Comex futures brokers raised their in-house margin requirements for silver to double or more than double the required margin at the Comex. The most prominent firm, and one of the world's largest commodity brokers, is MF Global. MF Global jacked its margins on Friday to a little over $25k. MF Global happens to be run by ex-Goldman CEO Jon Corzine. Hmmm, anyone think there is any connection between Corzine and the big firms who control the Comex? How about between Corzine and the CFTC chairman who is also an ex-Goldmanite? Another very large futures broker, thinkorswim - which happens to be owned by Ameritrade - raised its margin on silver to over $30k. Anyone besides me understand that Ameritrade caters to small, individual speculators who were likely forced to sell to cover this margin hike?

Needless to say, last night's ambush was comically initiated right at the open of electronic trading, which commences in the early evening on Sunday, when the futures markets tend to be at their least liquid. There was an absolute flood of sell orders at the open but the cliff-dive chart was accompanied by a relatively small amount of total volumn. This suggests that there were some motivated "sellers" trying to push the market lower and force selling by the MF Global or Ameritrade customers who would be unable to meet the new margin requirements. To be sure, there was also plenty of unloading by longs who were frightened by the volatility and wanted to protect any profits they might have.

Anyone who thinks this was anything but a criminal event staged by the corrupt Wall Street crime "families" needs to better educate themselves on the facts of the precious metals market. Please notice how the dollar is now plummeting, gold is now UP over $7 from Friday's close and silver is down a mere 80 cents. Kudos to all of those who understand the dynamic and held on tight to their position. It is a tried and true law of economics and markets that market interference/intervention always fails and ultimately backfires on the parties attempting to manipulate. In this case Wall Street crime families and the Fed.

Quite frankly I think it's tragic that there are well-respected analysts like Ted Butler out there spreading the gospel that the CFTC and SEC will ultimately crack down on this or that bullion ETF's like SLV and GLD are legit. In his latest newsletter he defended SLV's credibility and made the claim that SLV holds all of the bullion that it is supposed to hold. He clearly has not read the prospectus or he would understand that there are legal loopholes a mile wide in both the GLD and SLV prospectuses that make it possible for both ETF's to play the fractional/leasing games with their metal. To assume that a criminal enterprise like JPM would not take advantage of this is a tragic flaw in Butler's body of work. It is absurd to overlook the obvious connection between the JPM Comex short position and the fact that JPM is the "custodian" of the largest known stockpile of Comex-deliverable silver bars on the planet. I know based on my 25 years of experience in this industry that the people who work on Wall Street and rise to the top get there by lying, cheating and stealing to whatever extent they can. The amount of money JPM is losing on its silver short is "blood" money. Expect this aspect of the game to become even more intense. But then again Butler lost all credibility with me in this part of his otherwise brilliant Comex/COT statistical/analytic work when he repeatedly and unyieldingly defended his view that the CFTC would eventually crack down on the corruption and fraud at that Comex. I got news for you Ted: the perps would be ice-skating in hell before that ever happens...

Quick editorial update: I just learned that China and Vietnam, the largest and fifth largest gold buyers in the world were closed last night for their May Day holidays. Adds even more weight to the argument that last night was a strategic ambush.

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.